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Video Game Maker Bringing in Executives to Play on Sales Side

When Activision Inc. hired its new publishing chief executive Michael Griffith away from Folgers coffee, it got exactly what it wanted: 24 years of Procter & Gamble Inc. experience.


Griffith was president of P & G;’s global beverage division, which markets and sells the $1 billion Folgers brand in dozens of varieties. He also ran its fabric and homecare business in Asia, hawking such brands as Tide detergent and Joy dish soap.


So what does coffee have to do with video games? “Everything,” according to Activision Chairman Robert Kotick. “Virtually all of our senior management team has some packaged goods background.”


Over the past two months, Kotick has been stacking Activision’s management team with additional executives more accustomed to selling water, coffee and fantasy trading cards.


Griffith joins recent hires Robin Kaminsky, formerly in charge of Aquafina water for PepsiCo Inc. and now head of global brand management for Activision; and Charles Huebner, former head of Hasbro Inc.’s Wizards of the Coast division and a former Coca-Cola Co. manager, now head of Activision’s worldwide studios.


The hires reflect an evolving industry need: wider marketing. Though the product at its core is sophisticated computer software, its growth lies in mass-market merchandising.


While other companies, including industry leader Electronic Arts Inc., have hired consumer marketing executives to top spots, Activision has taken it further than most.


“The focus that Activision has in this regard is pretty unique and that’s a good thing,” said Arvind Bhatia, an analyst with Dallas-based Southwest Securities. “What they’re doing is right on. It’s borne out in the performance, the earnings and in the stock price.”



Consumer marketing


Activision reported fourth-quarter net income of $3.6 million, compared with $6.7 million for the like period a year earlier. That came even as revenues grew to $203.9 million from $162.9 million. The company blamed higher operating expenses, as well as a number of co-productions with other publishers in which they had to share profits.


Revenue growth has come from sales of its strong-selling titles, including the wildly popular Tony Hawk skateboarding franchise, Doom (where “space marines” battle demons on a far-away planet), and games based on Spider Man and other comics.


The company’s hiring reflects its larger marketing strategy: building brands that can last for years, using product placements, and in the case of Doom, spinning off the occasional Hollywood movie.


Activision has signed up 60 athletes in sports ranging from skating and surfing to mountain biking, though they are virtual unknowns outside of their niche sport. That’s the model it used with its Tony Hawk skateboarder franchise.


Since the first game’s release in 1999, Activision has had six sequels. From 2002 to 2004, the Tony Hawk franchise accounted for about 30 percent of revenues. “These are packaged goods. I don’t know who still calls this stuff ‘software,'” said Michael Pachter, video game analyst with Wedbush Morgan Securities.


Electronic Arts Chief Executive Larry Probst spent six years with Johnson & Johnson and two with Clorox Co., but Activision has taken the idea of hiring packaged goods executives and institutionalized it.


The company started recruiting them in numbers about five years ago, according to Laurie Weitz, president of Malibu-based executive search firm Weitz & Associates, which has been recruiting director-level and manager-level employees for Activision for almost eight years.


“We’re looking for a consumer-driven marketing profile and a lot of the food and beverage companies are structured that way. Health and beauty too,” Weitz said.


Griffith ran both global and Asia divisions for P & G; and likely will be focusing on growing Activision’s international sales something Kotick admitted needs to be bolstered.


His five-year contract provides him with a base salary of $600,000, plus annual increases and bonuses based on meeting objectives, according to a recent company filing. He also was granted options on one million shares of Activision over five years, at a June purchase price of $17.12. And if by May of 2010, his total compensation has not exceeded $20 million, the company will make up the difference.


Kotick said there was another reason he liked Griffith for the job: the 48-year-old executive plays video games.


“Try finding someone with 25 years in brand management, whose most important focus is operating margin expansion who also happens to be a gamer,” Kotick said.

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